Moneymakeover Should we invest in property, continue with investments, or pay off the mortgage?

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ryan.gallagher

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Personal details

Your age: 38
Your spouse's age: 38

Number and age of children: 1 child, 7 years old


Income and expenditure
Annual gross income from employment or profession: 190K base + 66K stocks(about the same vesting every year)
Annual gross income of spouse/partner: not working, no pension, etc

Monthly take-home pay: 8.1K

Type of employment: Employee
Employer type: private company, US tech

In general are you: (b) saving
(a) spending more than you earn, or
(b) saving?


Summary of Assets and Liabilities
Family home value: 850K
Mortgage on family home: 446K
Net equity: 404K


Cash: 31K
Value of pension fund: 106K, started maxing out the tax relief limits(115K * 20%) last year
Stock shares: 400K(about 70K of them are in my employer company stock)

Total net assets: 941K


Family home mortgage information
Lender: AIB
Interest rate: 2.3%
Type of interest rate: 4 years fixed, ends by the end of 2025

Remaining term: (Original term is not relevant)
Monthly repayment:

Other borrowings – car loans/personal loans etc

No credit card
No other borrowings

Insurance comes with the job/employment
  • Death in service: 725K
  • Income protection: 123K

I realised that I invested too much in the stock market, and I'm not earning anything there.

I'm thinking about other options like
  1. Investment property?
  2. Pay off home mortgage?
  3. lump-sum top-up to my pension(exceeding tax relief limits)
Any suggestions would be appreciated!
 
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Pity you only started maxing pension contributions last year but I guess you are where you are.

Does the €400k in stocks represent a diversified portfolio or are they all shares in your employer? If it’s the later, I think you should liquidate most, if not all, of the shares and throw the proceeds at your mortgage.

Personally, I’m not a fan of investing after-tax money while carrying debt.

However, once you clear the mortgage, it would be tax-efficient to hold some income producing assets in your spouse’s name.

I think you should also consider creating a bare trust for your child and maximising the annual small gift exemption from yourself and your spouse.

Finally, I would encourage you to ensure that you are appropriately insured - if anything was to happen to you or your salary your family could find themselves in real difficulty.

Hope that helps.
 
Thanks for the great suggestions.

I'll look into them.

€400k in stocks is a diversified portfolio.

I do have a death in service insurance of 4 times my base salary and 75% of my base salary as income protection.
They come with the job, not sure if I should get something else too.

Updated the initial post with the same
 
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Sarenco said:
However, once you clear the mortgage, it would be tax-efficient to hold some income producing assets in your spouse’s name.
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What do you mean by this @Sarenco ?

Also if the OP is trying to "catch up" with their pension would a lump sum still not be justified? Do you mean it's better to exhaust all other tax efficient things that money could be put toward first such as home improvements (e.g, insulation and solar)?

Maybe the OP should also consider other income protection like, heaven forbid, if they became sick or incapacitated?
 
ryan.gallagher said:
I realised that I invested too much in the stock market, and I'm not earning anything there.
Click to expand...
Why do you think you're not earning anything there?

400k in diversified stocks is likely to multiply over many years - what's your worry?

If anything you should stop investing in stocks, sell your company shares and aggressively pay down the mortgage after you max your pension.
Keep the current stocks as is...
 
@CharlieMac

The OP’s spouse has no income so it would be tax-efficient to hold any income producing assets (eg dividend paying stocks) in his/her name to maximise personal allowances, the standard rate tax band, etc.

There is no mechanism under our tax code to make “catch up” pension contributions - the relief is very much a “use it or lose it” situation.

I very much agree that income protection is critical in the OP’s circumstances but s/he seems to be well covered in that regard.
 
Well his income is mostly covered if he dies but he might have an event in which he doesn't... and his wife has no income. Hence my thinking about personal accident or other named illness cover might be worth thinking about?

Yes the pension tax relief is use it or loose it but are you not in favor of over paying anyway, especially in cases where one has ground to make up?
 
The OP has told us that he has income protection in addition to life assurance.

Why would you pay into a pension with no tax relief if it’s taxable on drawdown?
 
Oh I didn't see the Income Protection 123k earlier or maybe the OP added it since in his edit.

Yes I see what you mean now about personal allowances within rate bands. I was thinking you probably didn't mean to suggest he purchase a rental property to have as an income producing asset in his spouses name...

Sarenco said:
Why would you pay into a pension with no tax relief if it’s taxable on drawdown?
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Well you don't just get back what you put in do you? Your contributions can avail of tax free compounded growth at a rate of return hopefully exceeding inflation at least? I'm asking as I'm in that boat myself curious what people think.
 
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